An Empirical Study on Life Micro Insurance: With Special Reference to Rural Market of Allahabad
“The future lies with those companies who see the poor as their customers.”
Prof. C.K. Prahalad
Introduction In every economy, insurance plays a crucial role in the life of their citizens. It does not only protect the value of their life but also contributes in the socio-economic development of the country. So far as life insurance sector in India is concerned, it is lagging behind as the seventy five percent of the total population is still without any insurance coverage. The majority of the total population i.e. approx sixty nine percent live in the rural areas and their main occupation is agriculture that generates low income and low savings. To bring such a segment under the umbrella of insurance, life micro insurance is one of the effective financial security tools. In order to grab such an opportunity several life insurance companies are endeavouring by offering life micro insurance product. But the policies of such companies are still not rural centric catering to the specific needs of the people. The various programmes of the government promoting agriculture and tiny industries, the scientific agricultural practices, the agrarian reforms, the empowerment of village panchayats and such other activities have created reasonable disposable incomes in the hands of the rural folk. At the same time, we find the rural economy dependent on vagaries of monsoons. The existence of Below Poverty Line (BPL) families, the stark illiteracy, and the low levels of awareness are the major stumbling blocks to protect themselves against risks. The life insurance penetration rate (ratio to GDP) is around 4 percent in the year 2016 which shows the under-exploited market. Literature Review Barik and Patra (2014) in their paper entitled on “Emerging Trends in Insurance- A Study in Indian Life Insurance Industry” find new trends such as hybrid distribution channel, regulatory trend, difficulty in designing marketing mix, online policy, claim management, customer servicing and FDI and growth. Shahi, Prarthana (2013) in her paper on “Recent Trends in the Marketing Strategies of LIC of India” reveals that the contribution of LIC to total industry in terms of life insurance offices has dipped down from 99.41 percent in the year 2001 to 30.94 percent in the year 2012. She further states regarding the marketing strategies adopted by LIC such as facilities to their existing employees, increasing the number of individual agents, introduced Life-Plus offices, increase in women employees, bancassurance and alternate channels, corporate communication and international joint venture. Bengal Chamber of Commerce and KPMG (2013) address the present context of insurance in regard to dynamics of external environment which changed the whole industry. Profitability, growth and risks are to be considered pertaining to shareholders view. Singh and Lall (2011) in their paper on “An Empirical Study of Life Insurance Products and Services in Rural Areas” lay stress on the examination of opportunities for insurers in rural market and what would be new strategies to tap the highly underinsured rural area. He finds that insurance companies are fulfilling many purposes of investments and savings at a time but maximum respondents buy insurance policies for tax rebate and family safety. He suggests that micro insurance product should be developed for under privileged people and rural areas population and products should be designed as per their needs and income. Sahu (2010) concentrates on current discussion and debate on micro insurance in India with focus on its outreach and efficacy and participation of the target groups in his paper on “Micro Insurance in India: Outreach and Efficacy”. He founds that existing micro insurance products are not demand driven in both high and low outreach areas. He further observes that there is lack of understanding, awareness, extension services and development of insurance market that grossly impact wider use of insurance products and its uptake particularly among low income groups. Objectives of the Study The main objective of the present study is to elicit the views of rural folks on life micro insurance in general and in particular to know their preferences, trusts and opinions regarding life micro insurance and concerned firms. Hypotheses
- Ho = Rural consumers prefer equally public and private life insurance sector in buying the life micro insurance policy.
- Ho = Rural consumers trust equally public and private life insurance firms.
- Ho = Public and private life insurance companies provide equal facilities to rural consumers.
Aspects | Items | Number | Percentage |
Age | Below 20 years 21-40 years 41-60 years Total | 18 95 27 140 | 12.86 67.85 19.29 100.00 |
Gender | Male Female Total | 121 19 140 | 86.43 13.57 100.00 |
Marital Status | Single Married Total | 77 63 140 | 55.00 45.00 100.00 |
Occupation | Agriculture Employee Business Professional Total | 55 31 33 21 140 | 39.29 22.14 23.57 15.00 100.00 |
Educational Qualification | Up to High School Intermediate Graduation and above Non-educated Total | 63 22 12 43 140 | 45.00 15.72 08.57 30.71 100.00 |
Annual Income | Below Rs. 25,000 Rs. 25,001-50,000 Rs. 50,001-75,000 Rs. 75001- 1,00,000 Above 1,00,000 Total | 32 58 30 12 08 140 | 22.86 41.43 21.43 08.57 05.71 100.00 |
Aspects | Items | Numbers | Percentage |
Insured | Yes No Total | 33 107 140 | 23.57 76.43 100.00 |
Sector Preference | Public Private Total | 116 24 140 | 82.86 17.14 100.00 |
Trust on Sector | Public Private Total | 128 12 140 | 91.43 08.57 100.00 |
Facilities by Sector | Private Public Total | 86 54 140 | 61.43 38.57 100.00 |
Type of the policy | Whole life Endowment Term Policy Money Back Total | 26 23 17 74 140 | 18.57 16.43 12.14 52.86 100.00 |
Sum Assured Value | Up to Rs. 1,00,000 Rs. 1,00,001-2,00,000 Rs. 2,00,001-3,00,000 Rs. 3,00,001-4,00,000 Total | – 26 44 70 140 | – 18.57 31.43 50.00 100.00 |
More premium to more Sum Assured | Yes No Total | 59 81 140 | 42.14 57.86 100.00 |
Periodicity of the Policy | 0-5 years 6-10 years 11-15 years 16-20 years Total | 45 27 46 22 140 | 32.14 19.29 32.86 15.71 100.00 |
Periodicity of the Premium | Weekly Fortnightly Monthly Quarterly Total | 17 13 67 43 140 | 12.14 09.29 47.86 30.71 100.00 |
Periodicity of Surrender Value | One year Two year Three year Four year Total | 48 25 29 38 140 | 34.29 17.86 20.71 27.14 100.00 |
Accidental Benefit | Yes No Total | 140 – 140 | 100.00 – 100 |
Free Look Period | 10 days 20 days 30 days Above 30 days Total | 55 31 54 – 140 | 39.29 22.14 38.57 – 100.00 |
Loan Facility | Yes No Total | 118 22 140 | 84.29 15.71 100.00 |
Automatic Risk Cover | Yes No Total | 140 – 140 | 100 – 100.00 |
Periodicity of Automatic Risk Cover | 3 months 6 months 12 months Above 12 months Total | – 29 41 70 140 | – 20.71 29.29 50.00 100.00 |
Automatic Risk Cover Benefit | Survival Benefit Death Benefit Both Total | – – 140 140 | – – 100 100.00 |
- Providing the need based products by analyzing the market with reference to socio-economic profile of the target audience.
- Companies should increase the number of products in their product portfolio as per the target market in rural areas. They should launch money back life insurance plans.
- The premium should not be high as they have the irregular and low income.
- Awareness and distribution levels are low in the rural markets. Therefore, the localized way of promotion and distribution should be adopted by life insurers.
- Life insurers should provide the Free Look Period facility for 30 days.
- Life insurers should also provide the automatic risk coverage (ARC), loan facilities, accidental benefits, etc.
- The Insurance Regulatory and Development Authority of India (IRDAI) should enhance the limit of Sum Assured from Rs. 2, 00,000 for the life micro insurance policy.
- IRDAI should also provide some relaxations in reference to Surrender Value.
- Malhotra, Naresh K., and Dash, S.(2011). Marketing Research: An Applied Orientation, Pearson Education, New Delhi
- Palande, P.S & Shah R.S. and Lunawat, M.L.(2007). Insurance in India: Changing Policies and Emerging Opportunities, Response Books, Sage publications ltd., New Delhi
- Avadhani, V.A. (2004). Marketing of Financial Services, Himalaya Publications, New Delhi
- Zeithaml, V. & Bitner, M. (2003). Services Marketing, Third Edition, Tata Mc Graw-Hill Publishing Company Limited, New Delhi
- Singh, Harnam and Lal, Dr. Madhurima (2011).“An Empirical Study of Life Insurance Products and Services in Rural Areas”, Zenith International Journal of Multidisciplinary Research, 1 8 290-305
- KPMG (2013). “Insurance Industry-Road Ahead, Path for Sustainable Growth Momentum and Increasing Profitability; Available from: www.kpmg.com/in Accessed on 19.05.2015
- Barik, Bhagabat and Patra, Rakesh (2014). “Emerging Trends in Insurance- A Study in Indian Life Insurance Industry”, Abhinav National Monthly Refereed Journal of Research in Commerce and Management, Abhinav Publication, 3 6
- Sahu, Basant K.(2010). “Micro Insurance in India: Outreach and Efficacy” Centre for Microfinance Research, Main Centre Lucknow
- Shahi, Prarthana (2013). “Recent Trends in the Marketing Strategies of LIC of India”, International Journal of Application or Innovation in Engineering and Management, 2 10 311-317
- www.irda.gov.in
- www.licofindia.gov.in
About the Author
Dr. Furquan Uddin Post-Doctoral Fellow Department of Commerce Aligarh Muslim University, Aligarh Contact No. 9889096025 Email: [email protected]
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